Report Previews a Crash-Free Auto Insurance Industry

It’s a title that speaks for itself: “A Scenario: The End of Auto Insurance.”

In the report recently published by Celent, the research firm previews how growing technologies will cut into the number of crashes and discusses the likely changes in an industry with fewer customers who need insurance.

Companies will see “a large reduction in their revenue as automobile insurance premiums drop,” authors stated in their report.

The trend of fewer crashes is already under way, with preliminary estimates from the National Highway Traffic Safety Administration showing that traffic fatalities in 2011 dropped 1.7 percent from the previous year. If projections hold, the number fatalities in 2011 will be at the lowest level since the NHTSA began keeping records in 1949. The previous low record of fatal crashes was posted in 2010, when there was a 2.9 percent decline from the number of fatalities in 2009.

And between 1991 and 2009, the volume of all crashes reported in the U.S. declined by an average of about 0.54 percent per year.

Celent goes further with its predictions in the report, subtitled “What Happens When There are (Almost) No Accidents.”

“The scenario is plausible because most of the technologies on which it depends are already available—and to some extent are already in use,” stated the report’s authors, who focused on telematics, collision avoidance, automated traffic law enforcement and autonomous driving as the four technologies that will “underpin the scenario.”

Vehicle telematics, a term describing information technology that records driving data, has the strongest presence in the current market, according to Celent, which predicted in its report that the technology becomes “mandated during the next five years.”

Also, automated traffic law enforcement and collision avoidance measures are expected to be mandated some time between 2018 and 2022.

But self-automated vehicles “have a longer way to go,” the report stated.

“Reliable, mass-produced [robot cars] are 5 to 10 years away, followed by preferred used in 2023 to 2027.”

Consumers wondering how much does car insurance cost when these technologies reduce the number of crashes will be happy to read Celent’s premium forecasts over the next decade.

According to the report, private passenger auto and commercial auto liability premiums will decrease between 2013 and 2017 by 20 percent from 2012 levels. Between 2018 and 2022, premiums will have decreased by 60 percent.

For physical damage premiums, Celent forecasts drops of 30 percent and 80 percent, for the respective time periods.

The report predicts that the drop in premium cost will be larger in 2018-2022 because “the most powerful loss reduction technologies”—traffic law enforcement and collision avoidance technologies—are expected to take full effect during that time.

As “the top line and bottom lines for auto insurance diminishes over the course of the scenario,” the sea change in the industry will force insurers to change how they market themselves, handle claims, sell, distribute and service their policies, develop products, maintain underwriting levels and collect data, according to the report.

The report’s authors said that, among the changes, they expect agent commissions and claims activity to drop along with the number of crashes and the size of premiums.

The full report can be found at Celent’s website.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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